Diminishing and increasing returns

I’ve got to get these things out although I don’t understand all this yet. I’m currently reading Complexity by M. Mitchell Waldrop, in which he in the first chapter tells about how Brian Arthur ponders a lot about “increasing returns”, as opposed to diminishing returns. (I’m sure there’s lots more about Arthur further ahead in the book; I’ve only read 90 or so pages yet.)

I’m not that familiar with economics theory, but as I read about increasing returns I thought about how it seems to be about the same thing as what Albert-László Barabási talks about in Linked: specifically “rich get richer,” and “preferential attachment.”

Increasing returns seems to say that actors that enter a market at an early stage, or at “the right time,” has a greater chance of gaining market share. Waldrop quotes Arthur’s examples with the QWERTY keyboard, VHS, etc, as examples of this – and also as examples of inferior technology getting more widely adopted – all because of random events. (Another story is about how foot-and-mouth disease plays a vital part in the rapidly increasing popularity of the gasoline engine over steam engines.)

Barabási writes about Google entering the search engine market at a late time and quickly becoming number one, which he uses as an example of “fit get richer” (instead of “rich get richer” which simply says that nodes that are added earlier in the life of the network are far more likely to become hubs – nodes with lots of links). ––– Got to go …